Budget 2016: More sops for start-ups likely

The government is likely to come up with more sops for start-ups in the upcoming Budget in a bid to create a business friendly environment for them similar to that currently present in Singapore.

For this, the Commerce and Industry Ministry has proposed a slew of measures to the Finance Ministry, including easy norms to get capital gains tax exemption and additional cut in income tax on royalty for technical services.

"DIPP wants to create the best ecosystem for start-ups in the country so that they should not move to Singapore. It has studied several start-up ecosystems of countries, including Israel, the US, the UK, Taiwan, Australia and Germany, but the best one is in Singapore. So, we want to give that type of environment and support to our start-ups," an official told Press Trust of India.

The government has recently exempted start-ups from paying capital gains tax, while announcing its action plan for them at the Start-up India event held on 16 January. However, to avail the exemption, start-ups are required to invest capital gains in the Fund of Funds recognised by the government.

"Similarly, there are issues concerning benefits in investments in listed and unlisted start-ups," the official said. "So, we need to ease these conditions in order to promote more and more investments in start-ups."

According to experts, India should adopt the model followed for start-ups in Singapore and check them from moving to the South-East Asian country.

"Start-ups in Singapore find good infrastructure, tax transparency, no bureaucratic hurdles, clear and defined rules and regulations and listing in international markets from Singapore is much easier than from India," said Krishan Malhotra of corporate law firm Shardul Amarchand and Mangaldas.

Earlier this month, Prime Minister Narendra Modi had announced several incentives to improve the start-up business in the country. The action plan offered a tax holiday and inspector raj-free regime for three years, exemption from capital tax and Rs 10,000 crore fund to support them.